A trade-off between initial capital and professional indemnity insurance is appropriate such that EUR 1 of initial capital is the equivalent of professional indemnity insurance cover of EUR 20 for a single claim against the firm and EUR 30 in aggregate.

a firm must not include any unrealised gains from investment
property (these should be reported as part of revaluation reserves);

(4)

where applicable, a firm must deduct any asset in respect of deferred acquisition costs and add back in any liability in respect of deferred income (but excluding from the deduction or addition any asset or liability which will give rise to future cash flows), together with any associated deferred tax.

Externally verified interim net profits or current account

A firm may include interim net profits or current account when calculating initial capital to the extent that they have been verified by the firm's external auditor and are net of any foreseeable tax, dividend and other appropriations.

where applicable, a firm must deduct any asset in respect of deferred acquisition costs and add back in any liability in respect of deferred income (but excluding from the deduction or addition any asset or liability which will give rise to future
cash flows), together with any associated deferred tax.

Ongoing capital requirements

A firm must, at all times, maintain a combination of professional indemnity insurance and own funds, at least equal to the requirements in this chapter for professional indemnity insurance and initial capital.

Own funds - Restrictions

the total amount of revaluation reserves, perpetual cumulative preference share capital, long-term subordinated loans and fixed term preference share capital must not exceed 100% of initial capital minus the sum of the items set out against B; and

(ii)

the total amount of fixed term preference share capital and long-term subordinated loans must not exceed 50% of initial capital minus the sum of the items set out against B.